Pop quiz: Apart from being tech companies, what do Amazon, Uber, Lyft, Airbnb, Spotify, Kickstarter, Indiegogo, DoorDash, Postmates, and TaskRabbit all have in common?
Answer: They all use Stripe to process payments.
While it might not be a household name (yet), Stripe has quietly been taking over the world of online payments. In fact, if you’re reading this post, there’s a good chance you’ve already made a purchase via Stripe (even if you didn’t know it).
In the past year, 84% of U.S. adults purchased something via Stripe. And when you consider that there are now more than a million businesses using Stripe to process payments, it’s easy to see how that 84% figure became a reality.
Of course, Stripe’s success didn’t happen overnight. The company’s co-founders, brothers Patrick Collison and John Collison, started the company in 2010 after dropping out of college and receiving a seed investment from Y Combinator (the startup accelerator program). And while older brother Patrick, Stripe’s CEO, was 21-years-old when they founded Stripe, and younger brother John, Stripe’s president, was 19, this wasn’t their first rodeo. They sold a previous company, Auctomatic, for $5 million in 2008, back when Patrick was 19 and John was just 17.
Flash forward to 2018 and Patrick and John Collison are two of the youngest billionaires in the world. After raising $245 million in September of 2018, their company Stripe is now valued at $20 billion – 4,000x more than what their first company had been worth.
When you look at this incredible level of hypergrowth that Stripe has been able to achieve, it begs the obvious question:
How the heck did they do it?
In this post, we’ll dive deep into how Stripe was able to go from $0 to $20 billion in less than a decade. Ultimately, there are four key lessons all companies can benefit from implementing:
- Solve a real problem.
- Obsess over customer experience.
- Have a vision for the future.
- Read books…lots of books.
1) Solve a real problem.
☝️ That’s how Stripe generated word-of-mouth around their new product.
When the Collisons launched their first company, Auctomatic, back in 2007, they came to an unexpected realization. They realized that the hardest part of starting an online business wasn’t coming up with an idea, or coding that idea into reality, or marketing that idea to potential customers. Instead, as John explained in an interview with Wired, “The hardest part was finding a way to accept customers’ money.”
At the time, the largest eCommerce companies invested in building their own systems for processing payments online. But for scrappy startups (like Auctomatic), this wasn’t a viable solution. Doing so was too expensive and required weeks of back-and-forth with the bank. So instead, many of those startups turned to PayPal, which promised to make accepting online payments easier. Only…it didn’t. To the Collisons, PayPal still felt unnecessarily clunky and complex, and it came with too many regulations and setup fees. For developers who wanted to get payments up-and-running on a website quickly and easily, there was still no solution on the market. At a time when every other aspect of starting an online business had become easier, accepting payments remained complicated.
And that’s how the idea for Stripe – “a developer-focused, instant-setup payment platform that [can] scale to any size” – was born. As John told Fast Company, “Stripe really did come about because we were really appalled by how hard it was to charge for things online.”
In 2011, the year the Collisons officially launched Stripe, they visited PayPal co-founders Peter Thiel and Elon Musk and told them, in a nutshell, that PayPal was outdated and broken. Then, the Collisons asked them for money…and got it. Recognizing the issues the Collisons saw with the current online payments infrastructure were legitimate, Thiel and Musk led Stripe’s $2 million Series A round of fundraising that same year alongside Sequoia Capital and Andreessen Horowitz.
Talk about a gutsy move. As John told Wired, “It’s a little impetuous to go to PayPal founders and say payments on the internet are totally broken. But look, you can WhatsApp anyone around the world and it’s free. It’s a remarkable act of coordination between the telcos and ISPs and the people who own the fiber underneath the sea to create this global communications network. Then, if you look at the economic infrastructure, we haven’t even started.”
The Collison brothers didn’t set out to revolutionize the world of online payments processing when they founded Stripe. Instead, they set out to solve the legitimate problem they faced as developers and entrepreneurs. And, as it turns out, they weren’t alone. Fellow developers and entrepreneurs who were part of the same accelerator program (remember Y Combinator) were experiencing the same problem and soon began adopting Stripe in droves – and they began telling their friends about it.
For the first couple of years, word of mouth among developers was the lifeblood of Stripe’s business. As Patrick explained in an interview with TechZing, “Initially it very much spread through a word of mouth process. That was surprising to us because it’s a payment system not a social network so it’s not something you’d think would have any virality whatsoever. But it became clear that everything else was so bad and so painful to work with that people actually were selling this to their friends.”
It’s clear that the spark that got Stripe’s growth started was identifying a legitimate problem that resonated with lots of people. But in order to maintain the word of mouth that accompanied Stripe’s launch, and in order to keep that word of mouth positive, Stripe couldn’t simply rest on its laurels: It needed to invest in delivering a stellar customer experience, both for its own customers and for its customers’ customers.
☝️ That’s how Stripe attracted its biggest accounts, like Lyft.
Developers who switch from legacy payments processing systems to Stripe notice the difference in experience immediately. For starters, installing Stripe on a website or in an app requires copying and pasting just seven lines of code – that’s it! A process that once took weeks can now happen in a single day.
As John explained in an interview with NPR, “We have lots of stories of people integrating payments in an afternoon or an evening and then launching their business the next day. And that just worked consistently.”
Of course, that installation experience is essential to what makes Stripe such an effective product. As you read in the previous section, developers had been longing for a payments solution they could quickly and easily plug into their own products, and Stripe delivered.
In addition to making their installation process a breeze, Stripe made their entire end-to-end customer experience as enjoyable as possible. For example, Stripe’s documentation is famously clear and concise, which makes it easy for developers to find answers to any questions they might have. Stripe also regularly hosts meetups, hackathons, and other events where developers can talk about their experiences with Stripe and share best practices.
Stripe did such a good job of building goodwill around its brand that when it started sending out welcome packages to new customers, which included Stripe-branded stickers and t-shirts, developers actually wore those t-shirts. As Facebook product manager Morgan Brown wrote in a Growth Hackers article, the Stripe swag “only fueled the positive vibes developers had of the company. These t-shirts were worn proudly and the care packages shared on social media, mostly from developer recipients to other developers who they were connected to online.”
And while it’s easy to see how Stripe’s focus on customer experience helped the service become even more popular among developers, we’re still only looking at one half of the Stripe experience. Because in addition to reimagining the way sellers accepted payments online, Stripe also reimagined the way buyers pay for things online. In other words, Stripe isn’t just concerned about the experiences its customers have, it’s also concerned about the experiences its customers’ customers have.
Unlike its predecessor, Paypal, Stripe doesn’t insert itself into the buying process. Instead, it works behind the scenes, which means buyers never have to leave a company’s checkout page or enter some third-party-branded workflow in order to complete a transaction. When you buy something from a company via Stripe, Stripe gets out of the way and does its job in the background. It’s seamless – there are no interruptions.
Meanwhile, as a seller, using Stripe means you get to maintain a one-to-one connection with your buyer. As Stripe’s Chief Business Officer, Bill Alvarado, told Fast Company back in 2012: “You look at Google Checkout, you look at PayPal – they get in the way of the product. In many ways, Google and PayPal are trying to create their own relationship with your customer. I think that’s the thing that Stripe has done right. We’ve designed this for fast use, yes, but also so that you can retain control of your experience, your product, and your customers.”
It’s this dedication to customer experience that led to Stripe win deals with major companies, like Facebook, Google, Slack, Salesforce.com, Shopify, Target, OpenTable, Yelp, and Lyft. Case in point: When the Collison brothers were asked in an NPR interview how Stripe was able to get a company like Lyft’s attention, John responded that the fundamental and most important thing was that Stripe “enabled product experiences that they wanted to have.”
Specifically, with Lyft, the ride-sharing service needed a system that allowed them to both charge their customers and pay their drivers – something that didn’t exist yet.
“There was no product that enabled a really good driver payment experience,” John explained, “And so we’ve kind of co-evolved with them to enable the best end-user experience.”
3) Have a vision for the future.
☝️ That’s how Stripe stays relevant.
While their obsession with providing the best experience possible has undoubtedly helped Stripe grow into the $20 billion company it is today, the future of the company still hinges on what they do next. As Patrick told NPR, those high company valuations that you see in Silicon Valley come with an expectation that those companies continue to perform. To quote Patrick:
“And so it would be a very dangerous mode to slip into, becoming rearward-looking, and looking at everything that has happened today because the much more relevant fact is what we release in 2018, what we release in 2019, what Stripe’s global expansion looks like and things like that. You don’t have a valuable company unless the company continues to execute.”
The Collisions built Stripe in order to solve a problem – a problem they themselves had experienced as developers and as entrepreneurs. But after succeeding in solving that problem, they didn’t stop working on Stripe. They didn’t say, “Welp, that’s good enough.” Instead, they continued, and still continue, to innovate, and they set their sights on solving a broader version of their original goal. Stripe’s mission is to “increase the GDP of the internet.”
Translation: Stripe doesn’t just want to make it easy for companies to accept payments, they’re on a mission to expand global eCommerce. And in order to that, they’re not simply building a payment tool – they’re building “economic infrastructure.” Here’s how John explained it to the Financial Times:
“It’s easy to send a packet of information anywhere in the world, but sending money isn’t so easy. It’s a question of the economic infrastructure that’s underneath the web. We personally think that’s a really important problem – you have great connectivity at the information level but not at the payments level.”
Of course, Stripe isn’t the only company thinking about how they can increase the GDP of the internet. And as tech reporter Miguel Helft wrote in Forbes in 2016, the GDP of the internet will continue to grow “with or without Stripe.” Helft went on to write that if the Collison brothers want to play a central role, “they will have to push Stripe beyond the startup crowd and into the mainstream of global commerce.”
A month after Helft’s article came out, Stripe took a huge step in that direction with the launch of its Stripe Atlas platform, which allows entrepreneurs anywhere in the world to incorporate their companies in the U.S. (specifically in Delaware, which is known for its business-friendly policies). Clearly, the Collisons have their eyes on the future and the future is global. As Patrick explained in his launch speech for Stripe Atlas, the company is committed to helping entrepreneurs in every corner of the globe – especially those in the Middle East, Latin America, Africa, and Asia. To quote Patrick:
“A majority of the growth over the next ten years will come from underserved markets. That includes about 6.2 billion people we don’t reach yet, and that’s a huge missed opportunity.”
4) Read books…lots of books.
☝️ That’s how Stripe’s founders got an edge on the competition.
To some, reading books might seem like an odd inclusion on this list. After all, when you’re building a company, it’s hard to measure, for example, the impact reading a book can have on revenue growth. But for the Collison brothers, reading has been an integral part of their operation from day one.
Over the years, several prominent investors have commented on how intelligent Patrick and John are, including Mike Moritz, who referred to the brothers as some of the “sharpest” entrepreneurs he’s ever backed; and David Lee, who had this to say about Patrick:
“He’s brilliant, he’s charismatic, he’s a good leader, he’s thoughtful and poised. It’s very rare to see all that in one person.” And while there are a variety of factors that influence a person’s intelligence, it’s fair to say that the Collison brothers – both avid readers – have benefited greatly from absorbing the ideas contained inside books.
As kids, the Collisons found school boring but were fascinated with physics and mathematics. According to Wired, Patrick would often smuggle history and science books into his classes. As he explained, “You could try to pound your head against the wall and think of original ideas…or you can cheat by reading them in books.”
Today, Patrick maintains a reading list of around 600 books, which range in topic from economics and programming to feminism and literary criticism. But if you had to pick just one book that has had the biggest influence on the Collison brothers, as well as Stripe’s company culture, that book would be The Dream Machine by M. Mitchell Waldrop. The Dream Machine tells the story of psychologist and computer scientist J.C.R. Licklider who’s visionary ideas helped make personal computing a reality. After reading the book as a kid, Patrick was eventually sad to learn that it had gone out of print. So, naturally, he bought the rights to it and started publishing it again. He also started giving all Stripe employees free copies.
So, what’s the point in encouraging your employees to read an old book? As Patrick explained to Stanford computer science students back in 2015, “So much of this early work is better than what we have today. Sure, we have solved all kinds of scaling issues, deployments, technology – but the core problems of helping people work together were thought about more back then. Their concept of technology was the empowering of humans through technology.”
But trust me: Not all of the books on Patrick’s reading list are concerned with computing or programming. Here’s a small sampling from his list:
- Twelve Tomorrows edited by Wade Roush
- Dracula by Bram Stoker
- War and Peace by Leo Tolstoy
- The Wealth of Nations by Adam Smith
- The Count of Monte Cristo by Alexandre Dumas
- The Feminine Mystique by Betty Friedan
- Spacetime and Geometry by Sean M. Carroll
- Anthropic Bias by Nick Bostrom
- The Mind-Body Problem by Rebecca Goldstein
At the end of the day, reading books, both non-fiction and fiction, will help expose you to a broader set of ideas and new ways of thinking. For the Collison brothers (Patrick especially) reading has helped them develop a better understanding of human nature and how they can leverage technology to better serve their customers (as well as their customers’ customers).
This Is Why Stripe Is the World’s #1 SaaS Company
When you take all of these factors into account, it’s much easier to understand how Stripe was able to grow from an idea to a global company worth $20 billion in just a few years. By solving a legitimate problem, obsessing over customer experience, having a clear vision for the future, and reading lots and lots books, Stripe’s co-founders were able to achieve hypergrowth.
One final pop quiz to close things out: When Forbes unveiled its annual Cloud 100 list for 2018 — a list of the world’s top private cloud companies — who do you think took the number one spot for the second year in a row?
Answer: You guessed it. Stripe.